As Arizona moves through 2025, the residential real estate market is navigating a delicate balance of competing forces: mortgage rate volatility, emboldened sellers, cautious buyers, shifting supply dynamics and macroeconomic uncertainty. The final quarter of the year, Q4 2025, will test whether the market can maintain momentum or begin tipping more decisively in one direction. Even more significantly, what we see in late 2025 could set the stage for the residential real estate market in 2026.

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Before diving into forecasts, it’s critical to understand one of the core wildcards: mortgage interest rates. Many people assume a linear relationship between the Federal Reserve base (fed funds) rate and mortgage rates, but history repeatedly shows that the correlation is weak and lagged.

• In September 2024, the Fed cut its base rate, and yet mortgage rates rose sharply and stayed elevated thereafter. That counterintuitive move reminds us that mortgage rates are influenced by bond markets (e.g. 10-year Treasury yields), mortgage-backed security spreads, inflation expectations, credit risk pricing and lender margins — not just the Fed’s policy rate.
• Lenders sometimes “front-run” market expectations. When markets expect a Fed cut, mortgage rates may fall in anticipation, only to reverse if the cut doesn’t materialize or is weaker than expected.
• As of mid-2025, mortgage rates remain lower than in 11 of the prior 12 months, though they have crept about 25 basis points above their recent lows. This indicates continued volatility and limited predictability.

Thus, one of the central levers for Arizona’s real estate outcomes in Q4 2025 and beyond, will be where mortgage rates settle. For our purposes, we might consider scenario bands: rates holding near mid 6%, drifting downward toward the 5.5-6.0% range, or, less likely, a bounce upward above 7%.

In parallel, supply and demand dynamics at the local level (e.g. listings, days on market, new construction) will modulate how much pricing power either side has. The Cromford Supply Index (for Phoenix) is now showing signs of bottoming and an upward straightening trend, which suggests demand remains steady (though not exuberant) and supply constraints may ease somewhat.

With that context in mind, let’s dive into what I expect for Q4, some advice for both sellers and buyers across the final quarter of 2025 and what might unfold in 2026.

For Sellers: Manage Expectations and Optimize Timing

Pricing pressure will intensify in certain markets

In many Arizona sub-markets (especially in the mid and entry price ranges), “days on market” are already reaching highs. That gives buyers more breathing room for negotiation of price, closing costs or repair credits. Sellers who price aggressively, or fail to differentiate, will face resistance.

With that said, some stronger submarkets (luxury, prestigious neighborhoods, highly amenitized communities) may begin to favor sellers again — less inventory and higher demand may reduce negotiating leverage for buyers in those pockets.

Inventory will be less constricted

The rising (or “straightening upward”) trend in the Cromford Supply Index suggests that supply constraints are easing, somewhat alleviating the intense scarcity seen during the pandemic years. As more homes come to market in Q4, sellers will compete against alternatives more aggressively. Sellers must lean into presentation, staging and marketing to stand out.

The advantage of early Q4 will be real

Sellers who list early in Q4 (October through mid-November) may capture buyers who are striving to close before year-end tax or cost considerations. Late Q4 (December) could see softer foot traffic and more price sensitivity.

Be strategic about concessions and incentives

In a softer segment, sellers may need to offer incentives (closing cost assistance, home warranties, flexible closing dates). But in stronger submarkets, they may be able to resist being forced into high concessions.

Expect slower upward pricing, not steep declines

I do not expect widespread dramatic price drops in Q4 2025, barring a shock. More likely is stabilization, mild increases (especially in desirable niches) and segmentation — some markets holding firm, others softening modestly.

Quality of condition and timing will matter more

Homes in superior condition, with modern updates, strong curb appeal and turnkey readiness will outperform. Sellers who delay or underinvest in these upgrades may lose traction.

For Buyers: Be Patient and Rate Lock Strategically

Negotiation leverage improves in many markets

In mid-to lower-end segments, buyers should become more aggressive in pushing for seller concessions and price reductions. The “seller edge” of the past few years will likely erode further in many locales.

Mortgage rate lock timing is critical

Buyers should watch rate movements carefully and be ready to lock when favorable. In highly volatile markets, locking early (with float-down options) may save tens of thousands over the life of a loan.

Don’t assume constant downward drift

Because mortgage rate behavior can be counterintuitive, buyers who assume rates will steadily drop may be disappointed. It pays to evaluate each lock window carefully and hedge risk.

Be selective, especially on condition

Lower-demand properties (older, needing repairs, less desirable locations) will linger. Savvy buyers with capital can negotiate more aggressively here.

Stretch for “better” product

With modest but persistent demand, stepping into properties with stronger fundamentals (good build quality, better location, lower maintenance) can yield upside if the market rebounds.

Monitor shadow inventory or delayed listings

As some sellers with ultra-low loans (e.g. 3-4%) begin to move, they may list only when compelled. That could introduce “hidden” supply and suppress pricing surprises.

2026 Mortgage Rate Scenarios

While Q4 2025 will set momentum, 2026 may see more definitive directional shifts, especially depending on how rates evolve. Below are several plausible scenarios, and what each might bring to Arizona real estate.

Scenario 1: Mortgage Rates Fall Below 6%

This is arguably a “sweet spot” outcome:

• Pent-up demand could surge, especially among first-time buyers or those previously sidelined by affordability constraints.
• Home sales volumes in Arizona might rise 5-10% year over year (from modest growth baselines).
• Price appreciation could return to the 3-7% range in many submarkets, particularly in transit-oriented, job-rich corridors.
• Buyers of 2025‐listed homes (especially in Q4) would benefit from equity lift if they bought earlier.

If rates dip meaningfully below 6%, we might see echoes of 2021’s demand surge, although probably not at the same scale due to macro constraints (inventory, labor, materials).

Scenario 2: Mortgage Rates Hover in Mid-6% Range

This is my base-case assumption (barring major external shocks):

• The market continues to be mixed/segmented. Some areas and price bands see modest price gains; others stay flat or even soften.
• Buyers with tight budgets will remain cautious; sellers in weaker neighborhoods may struggle.
• Momentum slows, but we avoid a broad collapse.
• Developers and builders may become more aggressive with incentives to clear inventory.
• Appreciation probably stays in the 1-4% range in strong submarkets, with flat or slight declines in weaker ones.

Scenario 3: Rates Climb Back Above 7%

Less likely, but plausible if inflation resurfaces or global risk sees a flight to safety:

• Demand could retract more broadly. Some buyers get priced out.
• Price softening may spread beyond weaker pockets and into more mainstream tiers.
• Sellers would feel more pressure to reduce price or offer concessions.
• Builders might pull back on new projects, especially speculative ones.

Bottom Line & Headlines to Watch

• Q4 2025 will likely be a period of conditioning, where the market tests its boundaries of strength and softness. Sellers may find less cushion, especially in commodity segments; buyers will gain modest negotiating power in many places.
• 2026 will be a hinge year, especially if mortgage rates fall meaningfully. A drop below 6% could unlock latent demand, but if rates stay elevated, we’ll likely see further segmentation and modest growth rather than dramatic swings.
• Local nuance will dominate. The “Arizona market” is not monolithic. Micro-markets, school districts, commute times and amenities will matter more. Brokers, agents and investors who localize insight will outperform.
• Locking strategy is critical. Borrowers and lenders alike must treat rate lock windows with respect; waiting too long could cost heavily.
• Product matters. Condition, design, energy efficiency, low maintenance and strong infrastructure will increasingly command premium valuation.

Author: Greg Remmers is a seasoned real estate broker and accomplished executive with over 25 years of leadership experience in the industry. As the Designated Broker and Chief Operating Officer of RE/MAX Fine Properties—one of the largest and most successful RE/MAX franchises nationwide—Greg drives growth, operational excellence, and a culture of high performance.

While many areas of Florida are on the verge of a housing market crash, one city is not only surviving — it’s actually thriving. 

Sales remain steady, home prices are holding, and inventory is moving faster than in other metros across the state. 

Experts attribute the city’s resilience to a combination of relatively affordable housing, strong local job growth, and an influx of out-of-state buyers seeking more space without leaving Florida. 

During the pandemic, buyers from New York, New Jersey, California, and Chicago poured in, drawn by low crime rates, lower taxes, and neighborhoods with distinct personalities. 

Prices surged, though not as sharply as in other Florida hotspots — and homes continue to sell briskly. 

‘Years ago, Jacksonville was way behind the national average in terms of housing prices,’ said local realtor Tonya O’Quinn. 

‘That changed during Covid, when people flooded in from out of state. But people still need to buy homes, and Jacksonville is still very affordable compared to the rest of the state and has has added charms.’ 

Over recent years, Jacksonville has transformed into a destination for homebuyers searching for a hidden gem. Its combination of affordability, sunshine, and diverse neighborhoods — from riverfront historic districts to modern suburbs — has helped the city remain resilient even as other Florida markets struggle. 

During the pandemic people were eager to buy property in Florida as Americans flocked to the state for sunshine and space, especially in Jacksonville 

Jacksonville’s appeal comes from its combination of affordability, sunshine, and diverse neighborhoods that all offer a different vibe for families and singles

Jacksonville, Florida realtor Tonya O’Quinn says the area has remained a hotspot despite Florida’s dismal housing market

Jacksonville, located along the St. Johns River in Northeast Florida, is also famously the birthplace of southern rock. 

Legendary bands like Lynyrd Skynyrd, The Allman Brothers, and Molly Hatchet got their start in the city, giving it a rich musical pedigree that locals celebrate through museums, festivals, and live venues. That cultural cache adds to the city’s unique appeal. 

With a population of around 977,267, Jacksonville offers homes that were once out of reach for buyers in Miami or West Palm Beach at a more reasonable price point, keeping the metro hot in an otherwise cooling Florida housing market.  

The median home price in the metro is $284,825, reports Zillow.Household incomes average around $72,564, and unemployment is under five percent. In fact, the job market in Jacksonville is booming, with Ameris Bancorp and Black Knight Financial Services headquartered there. 

The owner of the NFL’s Jacksonville Jaguars, Shad Khan, is the most well-known billionaire living in Jacksonville. He loves the area so much his Iguana Investments purchased a luxury hotel and is developing it in the city.

The housing market varies, with some neighborhoods more affordable than others,  said O’Quinn, and the luxury market, where homes sell for $1 million and up, has remained especially strong since Covid.

Businesses followed, with Louis Vuitton, Chanel beauty, Gucci, and Tiffany & Co., Alo and Apple now located at St. Johns Town Center, an open air upscale shopping development popular with locals.

One sign of the area’s continuously strong housing market was the 2021 arrival of luxury design firm Restoration Hardware, which opened up a a 70,000-square-foot furniture gallery and the popular RH Rooftop Restaurant, where six pieces of lemon grilled shrimp will cost you $26.

Molly Hatchet, the southern rock and hard rock band that formed in the 1970s, is from Jacksonville

Locals have rooftop bars where they can have drinks and see the downtown skyline view of Jacksonville

The housing market varies in Jacksonville and the luxury market, where homes sell for $1 million and up, has remained hot since Covid

Jacksonville has neighborhoods like Avondale, which is walkable and has boutique shopping, coffee shops and many restaurants that residents go to

Restoration Hardware moved into Jacksonville after the housing market remained a hotspot, the rooftop bar and restaurant is a popular spot for locals

Jacksonville Landing, a waterside spot filled with restaurants, shops, offices and a walkway 

Jacksonville is also home to Riverside Avondale, an upscale neighborhood with trendy boutiques, bars, and antique shopping. The nearby River & Post is known by locals to have the rooftop with the best downtown skyline view of Jacksonville.

The Riverside Arts Market is a weekly market held rain or shine under the Fuller Warren Bridge every Saturday and features local art, fresh produce, live music and food trucks lined up along the river. 

There is a world-class art collection at the Cummer Museum of Art and Gardens and the area is listed in the National Registry of Historic Places. It’s often voted as one of the country’s top 10 neighborhoods.

O’Quinn said several of Jacksonville’s hottest neighborhoods are also extremely desirable for their affordability and schools.

In 2019, Deutsche Bank moved more than 2,000 jobs from New York City  to Jacksonville, luring staff with the promise of a dramatically lower cost of living, affordable beachfront homes and the most exclusive private schools for their kids.

Avondale is the artsy, walkable neighborhood that’s got historic charm and is great for families.The average home value about $432,493. It’s known locally to be the perfect city for first‑time buyers.

Mandarin, a riverfront neighborhood filled with restaurants and boutiques, is more suburban with newer home developments. The average home there costs $507,156, and rose 2.3 percent from August 2024 to August 2025.

San Marco is more affordable. Filled with historic homes and new riverfront builds, it has steadily attracted buyers. The average home price there is $362,100.

Jacksonville’s hottest neighborhoods are extremely desirable for their affordability and schools, the area has remained a popular place to move to

The Avondale neighborhood in Jacksonville is walkable and popular with locals for its walkability and different types of restaurants

San Marco is more affordable and filled with historic homes and new riverfront builds, it has steadily attracted buyers for its beauty

Residences in downtown Jacksonville, which has managed to stay afloat as most of the Sunshine State is in a housing crisis

Ponte Vedra Beach in Jacksonville, which has managed to remain a hot real estate market due to its diverse neighborhoods and access to the water

Neptune Beach is centered on luxury beach living. The average home value there is $725,532 for a coastal home. 

Family‑friendly areas like Nocatee, Julington Creek Plantation, and the Beaches (which includes Neptune Beach, Atlantic Beach) are sought after for good schools and a good quality of life near the beach.

Besides out-of-staters discovering the city during Covid, Jacksonville also sees buyers from Florida fleeing more expensive or crowded metro areas like Miami and West Palm Beach.

O’Quinn said the luxury market in Jacksonville is doing especially well, calling it ‘resilient.’

Some neighborhoods are holding value and even growing modestly, including Mandarin and Neptune Beach.

Homes in lower demand areas or higher‑priced homes are staying listed a bit longer, and some sellers who won’t negotiate may see longer waits.

‘But if interest rates drop meaningfully, that could reawaken buyer demand even more,’ O’Quinn said.

The weakened Washington, D.C., housing market is bracing for a “direct impact” from the federal government shutdown, coming just months after the Department of Government Efficiency (DOGE) sweeping job cuts.

The shutdown went into effect early Wednesday morning, after Republicans and Democrats in Congress failed to reach an agreement to continue funding government services.

The federal government employs roughly 3 million people—750,000 of whom have now been furloughed.

Typically, once the shutdown ends, those workers would resume their jobs and receive back pay, but the Trump Administration reportedly plans to use the impasse to further cull the federal workforce.

Speaking to reporters Wednesday, White House press secretary Karoline Leavitt warned that layoffs would be “imminent.”

That spells bad news for the D.C. metro area, which has the nation’s highest share of federal workers, at roughly 11%.

“The Washington, D.C. housing market is more exposed to the government shutdown than anywhere else in the country, given the region’s deep ties to federal employment and contracting,” confirms Bright MLS chief economist Lisa Sturtevant.

On a practical, short-term level, Sturtevant says the shutdown could delay home sales due to slowdowns in FHA and VA loan processing. Additionally, it will shut buyers out of the market looking to purchase properties in flood zones, because the National Flood Insurance Program (NFIP) has lapsed.

Beyond that, the Bright MLS economist predicts that the political crisis now unfolding in the capital’s halls of power will negatively impact housing supply and buyer demand going forward.

“Even the uncertainty created by this shutdown will cause prospective homebuyers to hold back and could cause more existing homeowners to leave the region,” says Sturtevant.

A government shutdown is nothing new in the D.C. metro. Over the past decade alone, the federal government suspended operations four times, most notably in 2018-2019, when furloughed workers went unpaid for a record 35 days.

Sturtevant says that while impacts from previous shutdowns on the local housing market have generally been “modest and temporary,” she insists this time is “different”—and the real estate sector will feel it.

“The region has been caught up in a series of other federal initiatives, including DOGE layoffs and budget cuts, return-to-the-office mandates and the deployment of the National Guard in the District of Columbia,” says Sturtevant, recapping some of the turbulent events that have occured in the capital since President Donald Trump‘s return to the White House in January.

In the first months of Trump’s second administration, DOGE, then headed by Tesla billionaire Elon Musk, carried out a large-scale campaign to drastically downsize the federal workforce, resulting in tens of thousands of job losses. Some unofficial estimates place the total number of positions cut in the hundreds of thousands.

Kevin Hughes, a D.C.-area real estate agent with The Group at Compass, agrees that this latest shutdown is not like the others.

“The government and politics has always reverberated through the D.C. house market, but we have never seen the volatility and lack of understanding of what is coming next,” Hughes tells Realtor.com. “In my years as a realtor, until Trump’s DOGE firings and now this shutdown, I have never seen the job stability of government employees impact so strongly the overall sediment and enthusiasm of the market.”

In the aftermath of the purge, the D.C. metro’s housing market has been left in a weaker state compared to other Mid-Atlantic markets, with more listings, slower home price appreciation and longer time on market.

During the week ending on Sept. 28 predating the start of the shutdown, new pending contracts in D.C. were down 4.1% year over year and there were 3.8% fewer showings compared to the same period in 2024, according to data from Bright MLS.

At the same time, the median listing price within the city plunged nearly 15% on an annual basis, to $624,950.

According to the September 2025 monthly housing market trends report from Realtor.com, active inventory in D.C. surged 48.7% compared to a year ago, with more than 18% of sellers offering price cuts.

Sturtevant says another aspect of this latest shutdown that sets it apart from its predecessors is the Trump Administration’s apparent pursuit of permanent job cuts, specifically in agencies and offices that are not aligned with the president’s policies.

“In prior shutdowns, non-essential federal workers were sent home but returned after the shutdown ended and received back pay,” says the economist.

Hughes says if the administration follows through with mass firings, he expects consumer confidence to plunge further in the local housing market.

“These firings don’t just mean changes for federal employees, but also anyone who has a job that relies on the federal government, i.e. government contractors, consultants, lawyers, lobbyists, etc,” notes the agent.

Sturtevant says impacts from the shutdown will likely vary across different parts of the region, depending on the share of federal workers living there.

Communities with especially high concentrations of federal employees, such as D.C. proper, Arlington, VA, and Alexandria, VA, stand to feel the most pain.

On the other hand, Loudoun County, VA, which has only 8% of government workers, should be relatively safe.

“Although it is difficult to predict the extent of the impact, a prolonged government shutdown, or a shutdown that results in permanent workforce cuts, would lead to a slowdown in housing market activity and likely to year-over-year declines in home prices,” says the economist.

In some good news, existing homeowners who do not have to move, or who have a significant amount of equity in their homes, will not necessarily be adversely impacted.

Also, both Sturtevant and Hughes agree that prospective buyers with jobs not tied to the federal government will find opportunities to get into the market with more options and lower prices.

“Longer-term, the Washington D.C. area will always be the seat of the federal government and will also be a major metropolitan area economy, attracting new jobs and residents and the housing market will rebound,” says Sturtevant.

Hughes says he hopes the local market regains its usual stability, but he harbours doubts.

“Unfortunately, because Trump’s policies are so erratic, the standard buyer and seller has a hard time feeling confident making a large investment without the confidence not only of their own jobs, but the jobs of others in the area,” he says.